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There’s an old saying that high taxes don’t redistribute income, they redistribute people. Unfortunately for the hard-working taxpayers of New York, this wisdom seems to be lost on Gov. Paterson and a majority of legislators in Albany.

For 2009, the Empire State earns the dubious distinction of having the worst economic outlook of any state in the nation — 50th out of 50.

This is according to the American Legislative Exchange Council (ALEC), a non-partisan membership association of state legislators. And New York’s dismal ranking was measured even before any of the proposed job-killing tax increases were on the table.

The second edition of “Rich States, Poor States: ALEC-Laffer Economic Competitiveness Index” presents economic outlook rankings of the states, based on the relationship between policies and performance — revealing which states are best positioned to make a recovery. The study examines how economic competitiveness drives income, population and job growth in the states and looks at the public policies that have enabled prosperity in some areas, while ruining business climates and causing economic malaise in others. Considering the competition in the latter category (California, Michigan, New Jersey, etc.), it’s quite an accomplishment for New York to rank dead last.

Poor labor policies, high state debt, excessive government bureaucracy, and sky-high property taxes have combined to devastate New York’s economic outlook. In fact, only six states in America impose higher property tax burdens than New York. Also of particular concern are punitive state and local tax rates on personal and business income. When you add New York City’s income taxes to the state’s onerous levies, individuals living in Gotham paid the highest income tax rates in America last year. If you include federal taxes, companies in the Big Apple paid the highest combined corporate tax rates in the industrialized world!

Disturbingly for New Yorkers, “Rich States, Poor States” found high state income taxes have a clear negative effect on income, population and job growth. New York legislators should be forewarned — increasing income taxes is an economic loser. Sadly, the report provides little consolation, as New York scored poorly on nearly all of the study’s 15 measurements. As a state with a reputation of a “tax purgatory,” it is little surprise this poor policymaking has driven almost two million residents out of the Empire State over the past decade.

For New York to improve its economic outlook, lawmakers must avoid the economically damaging tax increases that will assuredly make things worse. In what should be intuitive to most, states cannot tax, borrow, or spend their way to prosperity. In fact, “Rich States, Poor States” outlines how states that spend less, especially on income-transfer programs, and states that tax less, particularly on productive activities such as working or investing, experience higher growth rates than states that follow the tired tax and spend approach.

The citizens of New York are clearly facing a frightening budget deficit, but it’s naive to think that increasing taxes will solve the fundamental problem of overspending in Albany. The truth of the matter is that New York doesn’t have a budget problem — it has a spending problem. As State Senator Owen Johnson recently said, “We need to make tough choices to live within our means. The best solution to our budget woes is to control state spending and promote policies that foster economic growth and job creation.”

Considering the dire budget situation that has supposedly “required” tax increases to solve, it’s astonishing to see appropriators still managed to increase spending by $11 billion through federal stimulus funds and other items in the current budget deal. In these challenging economic times, families and businesses are required to live within their means everyday. It hardly appears government in New York is doing the same. For instance, the Manhattan Institute reported that state agencies added 232 employees in 2008 with base salaries exceeding $100,000 each.

Speaker Silver and Gov. Paterson are now patting themselves on the back after their “millionaire’s” tax hike forced one of New York’s most successful entertainers, Rush Limbaugh, to forego future business in the Big Apple. I wonder if it occurred to Messrs. Silver and Paterson that taxing away your most successful citizens — and largest “donors” to state coffers — may not be the greatest strategy to balance the budget? New York’s tax-hiking budget might as well be called the West Palm Beach Economic Development Act.

More worrisome for policymakers is the fact that New York has just given a multitude of high-income individuals an increased incentive to move away. These are the taxpayers who surely have the resources to pick up and move to states with accommodating tax climates. California learned this lesson the hard way after the state adopted this sort of “soak the rich” scheme. Astonishingly, the number of reported millionaires in California dropped, and the forgone tax revenue from these tax émigrés cost the state treasury roughly $6 billion between 2001 and 2003 alone. The Golden State taxed away its geese.

The same thing will happen here — the Manhattan Institute estimates tax increases in the current budget will cost the state an astounding 15,500 private sector jobs.

Furthermore, using the term “millionaire’s tax” is hardly accurate to describe the current proposal, since the tax is set to hit single filers with incomes at $200,000 and couples at $300,000. New York’s tax increase is also being sold as a “temporary” levy. Oh really? If New York taxpayers believe that, I’ve got some ocean view property in Syracuse for sale.

We can all hope legislators in Albany will come to their senses before it’s too late to repair New York’s economic outlook. If not, the state will serve not as beacon, but a warning.

Jonathan Williams is director of the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council and a co-author of “Rich States, Poor States.”